Goldman Sachs Daniel Boyd feels the market sell down for offshore drillers is overdone.
Investor fears related to the six month moratorium on deepwater drilling in the US Gulf are overdone from a fundamental perspective, in our view as this represents just 3%-5% of annual revenues for the major companies. We ultimately expect the financial impact to be minimal (3%-7% of EPS in 2010 and we are slightly lowering our estimates to reflect this) and temporary given not only the importance of DW to US oil supply but that many of the rigs will move to international locations where there are current shortages.
They're approaching the trough valuations they hit when the world was ending in early 2009:
Here's a stock-by-stock breakdown of the price to book valuations:
Look for 2Q earnings as a positive catalyst:
With P/B and EV/GCI at “reasonable” trough levels, we recommend longer-term investors buy the group now though recognize that short-term investors might prefer to wait until either the oil spill is contained, which will give more confidence that the DW drilling ban will be lifted in six months, or 2Q results which we expect to confirm our view that global fundamentals will remain strong.
Mr. Boyd is also particularly bullish on another gulf disaster stock, outside of the drillers, Halliburton
We maintain our Buy rating on Halliburton. We think that the shares are now discounting trough assumptions given that it is trading at just an average historical multiple of the actual 1Q2010 trough in earnings.
Perhaps these are the smarter BP-disaster plays, the stocks which have fallen hard along with BP due to the gulf disaster, but aren't nearly as exposed to the ballooning potential liabilities.
From Vincent Fernando at The Business Insider